Nastia Liukin on her way to winning gold in the women's all-around gymnastics event. Photograph: Julian Finney/Getty Images

For a change there were no bombastic chants of 'China! China!', or flutterings of red flags at the denouement of a gymnastic event - just generous applause as two American girls hugged each other tightly after winning gold and silver in an enthralling individual all-round gymnastics final.

Shortly after that embrace, the Russian-born but American-bred Nastia Liukin walked on to the podium to accept her gold medal. One side stood her room-mate, Shawn Johnson, who won silver. On the other, China's Yilin Yang who took the bronze. Liukin, tears in her eyes, accompanied the Stars and Stripes as best she could, but she looked in utter shock.

"I can't believe it actually happened," she said afterwards. "I worked so hard for so many years for this I don't know what to say."

In particular she praised her father and coach Valeri, who won two gold medals for the Soviet Union in the 1988 Olympics - but only took silver in the all-round competition - and her mother, Anna Kotchneva, a world champion rhythmic gymnast.

"I owe everything to my parents," she said. "My Dad is with me every day of my life and he's the reason why I'm Olympic champion. My Mum helps with the moral side, helping me get through all the difficult days."

Luikin's father, Valeri, was quick to return the compliment saying his daughter's victory felt "a million times better" than his gold medals.

Meanwhile Yang Yilin didn't sound too disappointed with her bronze, saying: "I think [the Americans] performed pretty well today. I am not as good as them."

The six best gymnasts from qualifying all started on the vault - one of Johnson's strongest events and Liukin's weakest. The scores reflected that, with Johnson posting 15.875 and Liukin, who selected a lower difficulty tariff, 15.025. But it was another gymnast, Romanian Steliana Nistor, who finished second in last year's world championships, who took an early lead by scoring 15.975 on the uneven bars.

The top gymnasts then moved on to the uneven bars - Liukin's best event and Johnson's worst. Liukin had fallen in the preliminaries, but this time her high-risk routine, which ncluding several one-handed manoeuvres, drew only gasps of excitement from the crowd. Only her dismount was poor, bringing her score down slightly to 16.65.

Johnson, meanwhile, slipped to fifth after a safe routine that scored her just 15.275. But it was Yang who performed best of on the vault, scoring 16.725 on the uneven bars to take a narrow lead ahead. But at this stage it was close with less than a point separating the top five gymnasts, with Yang on 31.900, Liukin second on 31.675, Nistor third on 31.525 - and Johnson just fifth with 31.150.

Next up was the balance beam, the apparatus on which Johnson had planned to make her move. Her score of 16.050 pushed her up to third, behind Yang, who struggled to maintain her balance several times before scoring 15.75, and Liukin who nailed a back layout with two-and-a-half twist to score 16.125 and move 0.15 ahead of Yang, with Johnson a further 0.45 back.

Earlier the National Indoor Stadium had been quiet, respectful even, but now the chants of "Come on China! Come on China!" echoed round the building. But Yang, who had scored significantly lower on the floor than her rivals in qualifying, was unable to capture the mood in her performance: her serene routine had few risks, not enough difficulty, and scored a solid 15.000.

This was Luikin's moment, and she seized it. There was explosiveness and energy in her tumbles and tucks and, crucially, no mistakes. Her score of 15.525 was a gold medal performance and the crowd knew it. This time it was the American flags that were waving, to boisterous chants of "USA! USA!".

Johnson then took to the floor encouraged by her room-mate, who encouraged her with a shout of "Come on Shaun". Her routine was expressive and tight, and enough to move her ahead of Yang. But by now Liukin was too far in front to be caught.

Becky Downie finished a creditable 12th, the best ever placing by a British gymnast in the event at the Games. "I was aiming to get into the top 24 and make the final," said Downie. "I knew it was possible. I only just qualified, but I pushed myself up the rankings today. Everything went really well today. I just wanted to do my best and enjoy it."